Hedge Rate Risk This Coming Year with the GSY ETF | ETF Trends

Inflation fears have been top-of-mind for investors, but those fears could be quelled with the proper strategy. One idea is adding fixed income portfolio protection with the Invesco Ultra Short Duration ETF (GSY).

“The single most important question in investing this year is whether the rampant inflation of the moment is temporary, as the Federal Reserve believes, or marks a historic shift,” a Wall Street Journal report noted.

GSY can be added to a portfolio and kept for the duration of the period of inflation thanks to an ETF’s dynamic trading ability. With the ease of getting in and out of positions like a share of stock, GSY can be held for as long as the investor wishes without wondering whether to hold it until a redemption date like a traditional bond.

The asset seeks maximum current income, consistent with preservation of capital and daily liquidity. The fund will invest at least 80% of its net assets in fixed income securities and in ETFs and closed-end funds that invest substantially all of their assets in fixed income securities.

It uses a low duration strategy to seek to outperform the ICE BofA US Treasury Bill Index in addition to providing returns in excess of those available in U.S. Treasury bills, government repurchase agreements, and money market funds, while seeking to provide preservation of capital and daily liquidity.

GSY Chart

Actively Managed and Short on Duration

With its active management component, fixed income investors essentially get a set it and forget it fund. GSY also focuses on debt issues that don’t exceed one year, making it an ideal option for minimizing interest rate risk in the short-term.

“This active ETF looks to achieve maximum current income while preserving capital and maintaining daily liquidity,” an ETF Database analysis suggested. “As a result, the fund should be considered an ultra-safe place to park assets in times of great turmoil.”

“Just don’t expect the fund to pay out a very high yield as the product only seeks to beat the 1-3 month Treasury Bill Index and maintains securities that have a duration of less than one year,” the analysis noted further. “The fund invests in both U.S. treasuries, corporate debt and even up to ten percent in high yield bonds. This added bond holding could help the fund boost yield and since it is such short term the product could see very little in terms of defaults.”

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